The Rudd government is set to announce a new rescue package for Australia’s ailing automotive industry, aimed at boosting demand for locally made cars.

Worth an estimated $200 million, the package is being negotiated with manufacturers Ford, Holden and Toyota.

The move follows Labor’s controversial plan to change the fringe benefits tax on company cars, expected to raise $1.8 billion over four years.

A spokeswoman for Innovation Minister Kim Carr said the rescue package was aimed at luring more buyers for Australian-manufactured vehicles.

“The government is still in discussions with industry about any potential additional measures to help boost the sales of locally made cars, which have been in decline over an extended period,” she said.

“Any measures would be aimed at lifting demand for Australian-made cars which are at their lowest production levels since 1957. This is as a result of the changes in the dollar and the fragmentation of the market.”

She said the government would stand by the changes to the fringe benefits tax, a move praised by social welfare peak body, the Australian Council of Social Services.

Australia’s car manufacturing industry is in sharp decline with Ford announcing it would cease local production in 2016.

Holden has threatened to cease operations at its Adelaide assembly plant unless its 1700 workers agree to a three-year pay freeze and cuts to conditions at a vote on Friday.

Toyota Australia was forced to sack 350 works from its Melbourne factory last year.